CapitaLand Retail China Trust (CRCT) posted results within expectations. In SGD terms, 2Q19 gross revenue dropped 1.9% YoY to S$55.2m while NPI increased 7.3% YoY to S$40.4m.

With regards to the NPI growth, note that there has been an accounting change; operating lease rental expenses associated with the CapitaMall Qihan and CapitaMall Minzhongleyuan leases have been replaced with net changes in fair value of investment properties and interest expense on lease liabilities.

In RMB terms, gross revenue was 1.9% YoY higher due to stronger rental growth from the multi-tenanted malls, offset by lower revenue from CapitaMall Grand Canyon and CapitaMall Qibao.

Overall, 2Q19 distributable income increased 5.0% YoY to S$25.4m, but due to the lack of capital distributions this quarter (2Q18 saw S$1.5m in capital distributions), the total distributable amount to unitholders dropped 1.2% YoY.

DPU decreased 3.8% YoY to 2.54 S cents or 24.6% of our initial full-year forecast which we consider with expectations. We maintain HOLD on CRCT but place our fair value of S$1.38 under review.

Source: OCBC Research - 31 Jul 2019